Macro Weekly Economic Briefing US

Macro Weekly Economic Briefing US

Blistering and broad-based inflation shows that the significant imbalance between strong demand and limited supply remains. What's more, the Russia-Ukraine war will add fuel to the blazing rate of inflation, posing a unique challenge for the Fed as it is set to start tightening policy. We look for the tightening cycle to start with a moderate 25bps hike next week. We expect the Fed to raise the policy rate by a total of 175bps this year as officials focus on dampening down inflation pressures.We anticipate that US GDP growth will remain buoyant, rising above 3.0% in 2022 before slowing to 2.1% in 2021. However, risks are decidedly tilted to the downside as the war in Europe rages on. Oil prices are trading at historic levels, and if they remain around $120/barrel through the end of the year, it could shave up to 0.4ppts from our GDP growth baseline this year as reduced consumer outlays are only mildly offset by increased energy extraction activity.